States That Lead and Lag in Job Growth and Competitiveness

Joshua Wright
, ContributorTracking workforce and economic development trends.Opinions expressed by Forbes Contributors are their own.

When a state expands its workforce from one year to the next, some of the spike might be related to the growth in an industry at the national level, like the continuing demand for health care. Some might stem from the overall growth of the national economy. Or some of the job growth might be explained by a third factor, what economists call the regional competitive effect.

Regional competitiveness explains how much of the job change in a given industry is due to some unique competitive advantage that a given region or state possesses. EMSI aggregated the results for each industry sector in all 50 states plus Washington, D.C. to see which states are growing more competitive – in other words, gaining a larger share of total job creation – and which are becoming less competitive.

The answer: North Dakota is far and away the leader, Nevada and New Mexico are at the bottom – and a host of surprises are in between.

Our Approach

To pinpoint the most competitive states for job growth, EMSI used “shift share,” a standard economic analysis method that reveals if overall job growth is explained primarily by national economic trends and industry growth or unique regional factors. Shift-share analysis helps distinguish between growth that is primarily based on big national forces (the proverbial “rising tide lifts all boats” analogy) versus local competitive advantages.

Industries with high regional competitiveness effects highlight a state's competitive advantages or disadvantages. Shift share does not indicate why these industries are competitive; it merely shows the sectors in which a state is outcompeting or undercompeting the nation.

Results

During a time of laggard employment growth for most of the U.S., North Dakota stands far above its peers as the most competitive state. The economic juggernaut had 10.6 percent more jobs in 2012 than expected based on national trends. The next closest were Texas (2.8 percent), Washington, D.C. (2.1 percent), Indiana (1.9 percent) and Utah (1.8 percent).

Results for every state can be found in the above map or at the bottom of this post.

If North Dakota had followed national trends, we would have expected it to have 416,450 jobs in 2012. In reality, it had just under 466,000 jobs. That's nearly 50,000 more than expected.

What's driving the robust growth in North Dakota? The oil and gas extraction boom for one thing. But better-than-expected gains in construction, transportation & warehousing and wholesale trade have also made this Great Plains state the most competitive. North Dakota now has 35% more construction jobs per capita than the national average (a location quotient of 1.35), after having 10% fewer jobs than the nation per capita in 2007.

Texas, meanwhile, was expected to sustain severe job losses in government and construction (the green bars in the chart below). But both sectors performed better than expected from 2009-2012, catapulting the Lone Star State to No. 2 on our list. It had nearly 338,000 more jobs than expected in 2012, which equates to 2.8% of all jobs.

Note: The industry mix effect in the chart (blue bars) represents the share of industry growth in Texas explained by the growth of the specific industry at the national level. The national growth effect (red bars) explains how much of the regional industry’s growth is explained by the overall growth of the national economy. Taken together, the two effects equal the expected change (green bars), while the rest of the growth or decline is explained by the regional competitive effect (purple bars).

Like Texas, government played a key factor in Washington, D.C.'s placement in the top three. Most states are seeing huge declines in federal, state, and local government – but not D.C. The sector grew by 3 percent from 2009-2012, much better than expected. Construction also saw big gains.

Fourth on the most-competitive list is a surprise: Indiana has the ninth-highest unemployment rate (at 8.7 percent) in the nation, but it has seen greater-than-expected increases in manufacturing and construction, while the retail trade sector added 11,000 more jobs than anticipated.

Other surprisingly solid-performing states include Kentucky (No. 6, with 1.2 percent more jobs than anticipated) and Michigan (tied for 10th, at 0.7 percent). Both have grown their manufacturing workforces more than expected, while Michigan has also seen a big uptick in temporary help jobs.

At the bottom, no states have failed to meet expectations more than Nevada and New Mexico, which are tied for last in competitiveness. Each has 3.5 percent fewer jobs than expected, in large part because of huge declines in construction.

Before the recession, Nevada had 64% more construction jobs per capita than the nation. Now it has 8% fewer jobs per capita. New Mexico has seen a similar dip in the information sector.